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Freight User Fee Legislation Introduced

On September 17, 2013, the Maritime Goods Movement Act for the 21st Century was introduced in the U.S. Senate. The bill would abolish the current Harbor Maintenance Tax (HMT), which is levied at U.S. ports in the amount of 0.125 percent of the cargo's value, and replace it with a new Maritime Goods Movement User Fee (MGMUF). The new user fee would also be levied at a rate of 0.125 percent of value, but would be applied to all maritime cargo entering the U.S., including shipments that first land in Canada or Mexico and subsequently cross into the U.S. by truck or rail. The bill would require that the revenues raised from the new user fee be spent on administrative costs and harbor maintenance, with particular set-asides for low-use ports and a new competitive grant program.

The new competitive grants would be restricted to maritime improvements, along with intermodal corridor projects and land port of entry projects that benefit international maritime cargo, and would cover up to 50 percent of project costs. At least three recipients each year would be "super donor ports," which the bill defines as ports that have, on average, spent less than 10 percent of the HMT or MGMUF revenues they generated over the previous five fiscal years. These super donor ports would receive a 15 percent set-aside of MGMUF revenues through the competitive grant program. Additionally, at least three recipients would be intermodal or land port of entry projects, which would receive a five percent set-aside of MGMUF revenues through the competitive grant program.

The HMT has long been of concern to U.S. ports. First, the Harbor Maintenance Trust Fund (HMTF), to which the HMT accrues, has a large unspent balance, as described in a 2011 Congressional Research Service (CRS) report. This situation has inspired legislative responses, including the proposed Realizing America's Maritime Promise (RAMP) Act in 2011. The proposed act would have restricted the HMTF to harbor maintenance programs, protected it from raids, and created a "spending guarantee" to address its large surplus. The spirit of the RAMP Act was included in Moving Ahead for Progress in the 21st Century (MAP-21), the current federal transportation authorization law, as a "sense of Congress" under Section 1536, which states that the "Harbor Maintenance Trust Fund should be fully expended to operate and maintain the navigational channels of the United States."

Second, the HMT raises equity issues, both domestic and international. A relatively small number of U.S. ports generate most tax revenues, but these ports generally have low maintenance costs. Other ports require extensive dredging and consume disproportionate shares of HMTF spending, but these resource-intensive ports are generally small and handle small shares of the nation's cargo. In short, the HMTF has the effect of forcing some U.S. ports to subsidize their competitors.

Additionally, some have argued that the HMT places U.S. ports at a competitive disadvantage to Canadian and Mexican ports. U.S.-bound cargo can land at ports like Vancouver or Prince Rupert in Canada or Lazaro Cardenas in Mexico, avoid the HMT, and then enter the U.S. by truck or rail. As described in CMAP's freight cluster drill-down report, these foreign ports have dramatically increased their capacity in recent years, benefitting from efficient intermodal connections to U.S. markets.

Conclusion According to the previously mentioned CRS report, Illinois received $78.65 million in HMTF spending between FY 1998-2008, or 1.1 percent of the national total for that time period. The CRS report does not provide further detail, but it is reasonable to assume that those dollars were largely spent on the Port of Chicago since the Inland Waterways Trust Fund finances the maintenance of riverways such as the Mississippi and Illinois. In general, Great Lakes ports receive more in HMTF revenues than they contribute. The Great Lakes tend to handle low-value bulk goods such as iron ore that provide little revenue to the Trust Fund.

CMAP strongly supports the user-fees principle in transportation financing, making it a centerpiece of the agency's adopted reauthorization principles. Unfortunately, it appears that the proposed Maritime Goods Movement Act may stray from that principle -- while the bill would collect the new MGMUF at land ports of entry (as well as maritime ports), it would require that the vast majority of expenditures support harbor maintenance projects. In fact, the bill would reserve only five percent of the MGMUF's revenues for intermodal and land port of entry projects.

The proposed bill seems to focus on the perceived international equity of the HMT, rather than its domestic equity. And the bill focuses almost exclusively on the infrastructure required to bring cargo into the country, but not to distribute it within the country. That issue is critically important to the Chicago region; about one-quarter of the nation's total freight and one-half of its intermodal freight touches the region.

A more comprehensive approach is needed to address the national multimodal freight system. GO TO 2040 calls for a national freight policy with dedicated funding and corridors of national significance. CMAP staff is currently working with partners to develop a freight policy platform before MAP-21 expires next year.